Risk perception and the effect of artificial intelligence on startup investment opportunities by different investor categories

Abstract

Decision-making is getting more complicated, as more information is available for consideration. It means that the Analyst/Investor's first gut feeling will often lead to an investment or divestment. Therefore, tools to make rational decisions will have a positive impact on the decision-making process of investors. These tools more often use artificial intelligence which influence in the area of investing has been rising considerably, especially in the sourcing and proposal of deals. These tools may prove particularly important in which motivated reasoning might be exceptionally high, hindering decision making. We hypothesize that to be the case of social finance investors. Social finance investors have both self-oriented and other-oriented motivations as such, opportunities which appeal in both fronts, at first sight, maybe particularly appealing, leading to a quicker appraisal of the risk involved and, consequently, worse decisions. In the following paper, we examine the risk perception and decision-making process of social finance investors (vs a control group of regular investors) and provide them with advice from an AI application highlighting different decision rules to explore if an AI Application can be a powerful help for these decision-makers and what rules it should follow to improve decision making.

Date of Award	26 Apr 2021
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Filipa de Almeida (Supervisor)